Category — TARP

On September 10, 2009, the Department of the Treasury issued guidance regarding communications with outside persons regarding Emergency Economic Stabilization Act funds (EESA) and Recovery Act funds. EESA is the implementing statute for the Troubled Asset Relief Program (TARP). The new guidance closely follows guidance issued by the Office of Management and Budget (OMB) on July 24, 2009, (see previous client alert here) and seeks to preserve consistency between Treasury guidance and OMB guidance.

The new guidance clarifies that communications between federal agency officials and outside persons, including federally registered lobbyists, concerning general logistical questions about Recovery Act funding or implementation are unrestricted. That is, requests for a meeting, inquiries concerning the status of an action, inquiries concerning the deadlines or logistics of Recovery Act funding opportunities or other similar administrative requests that do not involve advocacy concerning Recovery Act policy or a particular project or application for funding under the Recovery Act are not subject to restriction and need not be publicly disclosed.

Click here to read the full alert.

The Legacy Securities Public-Private Investment Program (PPIP) announced by the Department of the Treasury in March 2009 calls for the formation of Public-Private Investment Funds (PPIFs), in which Treasury and private investors will “co-invest” funds to purchase certain legacy securities. Treasury’s investment in the PPIFs will use funds from the Troubled Assets Recovery Program (TARP). The PPIFs related to Legacy Securities will be managed by asset managers who have been selected by Treasury as eligible and who raise sufficient equity to satisfy Treasury’s requirements.

Pursuant to the Emergency Economic Stabilization and Recovery Act of 2008 (EESA), recipients of TARP funds may be subject to certain executive compensation restrictions. As such, there has been much speculation as to whether the EESA compensation restrictions would apply to asset managers of Legacy Securities PPIFs.

On April 21, 2009, Treasury issued an updated “Frequently Asked Questions” circular announcing that the executive compensation restrictions will not apply to asset managers of, or private investors in, PPIFs, provided the PPIFs are structured such that the asset managers themselves and their employees are not employees of, or controlling investors in, the PPIFs, and other investors are purely passive.

Click here to read the full text of this alert.

On March 12, 2009, the House Financial Services Committee approved a bill to broaden the authority of the SIGTARP.  The Senate had already passed the legislation by voice vote in February.  Among other things, the bill gives the SIGTARP authority to hire more auditors and investigators quickly, including permission to hire up to 25 retired federal investigators and auditors at a time without having to offset their pensions.  Additionally, the bill expands the SIGTARP’s authority to carry out audits and investigations.

See this legislation here.

This posting briefly summarizes the key provisions of the Emergency Economic Stabilization Act of 2008 (the “Act”), which, after being passed by the Senate on October 1, 2008, was passed by the House and signed by President Bush on October 3, 2008.  The Act will, among other things, “immediately provide authority and facilities that the Secretary of the Treasury can use to restore liquidity and stability to the financial system of the United States.”  Section 2(1).

General Provisions

The Act grants the Secretary of the Treasury (the “Secretary”) authority to establish a troubled asset relief program (the “program”) to purchase, and to make and fund commitments to purchase, “troubled assets” from any “financial institution.”  Section 101(a)(1).  “Troubled assets” include “residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008,” as well as any other financial instrument that the Secretary, in consultation with the Chairman of the Board of Governors of the Federal Reserve System, deems “necessary to promote financial market stability,” so long as such determination is transmitted in writing to certain congressional committees.  Section 3(9).  A “financial institution” is “any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company, established and regulated under the laws of the United States or any State . . . and having significant operations in the United States, but excluding any central bank of, or institution owned by, a foreign government.”  Section 3(5).

The Act grants the Secretary authority to purchase up to $700 billion of troubled assets under the program.  The authority to spend $250 billion goes into effect immediately.  Section 115(a)(1).  The President may increase the limit to $350 billion at any time by submitting a written certification to Congress.  Section 115(a)(2).  Authority to spend the final $350 billion goes into effect if the President submits to Congress a written report detailing the Secretary’s plan to spend it, unless Congress enacts a joint resolution disapproving of the plan within fifteen days of such submission.  Section 115(a)(3), (c)(1).

The Secretary’s authority under the program expires on December 31, 2009.  Section 120(a).  The Secretary may, however, extend the authority to no later than two years from the date of enactment by submitting a written certification to Congress.  Section 120(b).
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